February 15, 2005, Introduced by Reps. Robertson, Hoogendyk, Shaffer, Taub, Gaffney, Gonzales, Stahl, Condino, Green, Garfield, Gosselin, Amos, Pastor, Sheen, Walker, Vander Veen and Kooiman and referred to the Committee on Insurance.
A bill to amend 1956 PA 218, entitled
"The insurance code of 1956,"
by amending section 2006 (MCL 500.2006), as amended by 2004 PA 28,
and by adding section 2006a.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2006. (1) A person must pay on a timely basis to its
insured, an individual or entity directly entitled to benefits
under its insured's contract of insurance, or a third party tort
claimant the benefits provided under the terms of its policy, or,
in the alternative, the person must pay to its insured, an
individual or entity directly entitled to benefits under its
insured's contract of insurance, or a third party tort claimant 12%
interest, as provided in subsection (4), on claims not paid on a
timely basis. Failure to pay claims on a timely basis or to pay
interest on claims as provided in subsection (4) is an unfair trade
practice unless the claim is reasonably in dispute.
(2) A person shall not be found to have committed an unfair
trade practice under this section if the person is found liable for
a claim pursuant to a judgment rendered by a court of law, and the
person pays to its insured, individual or entity directly entitled
to benefits under its insured's contract of insurance, or third
party tort claimant interest as provided in subsection (4).
(3) An insurer shall specify in writing the materials that
constitute a satisfactory proof of loss not later than 30 days
after receipt of a claim unless the claim is settled within the 30
days. If proof of loss is not supplied as to the entire claim, the
amount supported by proof of loss shall be considered paid on a
timely basis if paid within 60 days after receipt of proof of loss
by the insurer. Any part of the remainder of the claim that is
later supported by proof of loss shall be considered paid on a
timely basis if paid within 60 days after receipt of the proof of
loss by the insurer. If the proof of loss provided by the claimant
contains facts that clearly indicate the need for additional
medical information by the insurer in order to determine its
liability under a policy of life insurance, the claim shall be
considered paid on a timely basis if paid within 60 days after
receipt of necessary medical information by the insurer. Payment of
a claim shall not be untimely during any period in which the
insurer is unable to pay the claim when there is no recipient who
is legally able to give a valid release for the payment, or where
the insurer is unable to determine who is entitled to receive the
payment, if the insurer has promptly notified the claimant of that
inability and has offered in good faith to promptly pay the claim
upon determination of who is entitled to receive the payment.
(4) If benefits are not paid on a timely basis the benefits
paid shall bear simple interest from a date 60 days after
satisfactory proof of loss was received by the insurer at the rate
of 12% per annum, if the claimant is the insured or an individual
or entity directly entitled to benefits under the insured's
contract of insurance. If the claimant is a third party tort
claimant, then the benefits paid shall bear interest from a date 60
days after satisfactory proof of loss was received by the insurer
at the rate of 12% per annum if the liability of the insurer for
the claim is not reasonably in dispute, the insurer has refused
payment in bad faith and the bad faith was determined by a court of
law. The interest shall be paid in addition to and at the time of
payment of the loss. If the loss exceeds the limits of insurance
coverage available, interest shall be payable based upon the limits
of insurance coverage rather than the amount of the loss. If
payment is offered by the insurer but is rejected by the claimant,
and the claimant does not subsequently recover an amount in excess
of the amount offered, interest is not due. Interest paid pursuant
to this section shall be offset by any award of interest that is
payable by the insurer pursuant to the award.
(5) If a person contracts to provide benefits and reinsures
all or a portion of the risk, the person contracting to provide
benefits is liable for interest due to an insured, an individual or
entity directly entitled to benefits under its insured's contract
of insurance, or a third party tort claimant under this section
where a reinsurer fails to pay benefits on a timely basis.
(6) If there is any specific inconsistency between this
section and sections 3101 to 3177 or the worker's disability
compensation act of 1969, 1969 PA 317, MCL 418.101 to 418.941, the
provisions of this section do not apply. Subsections (7) to (14) do
not apply to an entity regulated under the worker's disability
compensation act of 1969, 1969 PA 317, MCL 418.101 to 418.941.
Subsections (7) to (14) do not apply to the processing and paying
of medicaid claims that are covered under section 111i of the
social welfare act, 1939 PA 280, MCL 400.111i.
(7) Subsections (1) to (6) do not apply and subsections (8) to
(14) do apply to health plans when paying claims to health
professionals and health facilities that are not pharmacies and
that do not involve claims arising out of sections 3101 to 3177 or
the worker's disability compensation act of 1969, 1969 PA 317, MCL
418.101 to 418.941.
(8) Each health professional and health facility in billing
for services rendered and each health plan in processing and paying
claims for services rendered shall use the following timely
processing and payment procedures:
(a) A clean claim shall be paid within 45 days after receipt
of the claim by the health plan. A clean claim that is not paid
within 45 days shall bear simple interest at a rate of 12% per
annum.
(b) A health plan shall notify the health professional or
health facility within 30 days after receipt of the claim by the
health plan of all known reasons that prevent the claim from being
a clean claim.
(c) A health professional and a health facility have 45 days,
and any additional time the health plan permits, after receipt of a
notice under subdivision (b) to correct all known defects. The 45-
day time period in subdivision (a) is tolled from the date of
receipt of a notice to a health professional or health facility
under subdivision (b) to the date of the health plan's receipt of a
response from the health professional or health facility.
(d) If a health professional's or health facility's response
under subdivision (c) makes the claim a clean claim, the health
plan shall pay the health professional or health facility within
the 45-day time period under subdivision (a), excluding any time
period tolled under subdivision (c).
(e) If a health professional's or health facility's response
under subdivision (c) does not make the claim a clean claim, the
health plan shall notify the health professional or health facility
of an adverse claim determination and of the reasons for the
adverse claim determination within the 45-day time period under
subdivision (a), excluding any time period tolled under subdivision
(c).
(f) A health professional or health facility shall bill a
health plan within 1 year after the date of service or the date of
discharge from the health facility in order for a claim to be a
clean claim.
(g) A health professional or health facility shall not
resubmit the same claim to the health plan unless the time frame in
subdivision (a) has passed or as provided in subdivision (c).
(9) Notices required under subsection (8) shall be made in
writing or electronically. Health plan, health professional, or
health facility computer failure or malfunction does not toll any
time periods under subsection (8).
(10) If a health plan determines that 1 or more services
listed on a claim are payable, the health plan shall pay for those
services and shall not deny the entire claim because 1 or more
other services listed on the claim are defective. This subsection
does not apply if a health plan and health professional or health
facility have an overriding contractual reimbursement arrangement.
(11) A health plan shall not terminate the affiliation status
or the participation of a health professional or health facility
with a health maintenance organization provider panel or otherwise
discriminate against a health professional or health facility
because the health professional or health facility claims that a
health plan has violated subsections (7) to (10).
(12) A health professional, health facility, or health plan
alleging that a timely processing or payment procedure under
subsections (7) to (11) has been violated may file a complaint with
the commissioner on a form approved by the commissioner and has a
right to a determination of the matter by the commissioner or his
or her designee. This subsection does not prohibit a health
professional, health facility, or health plan from seeking court
action.
A health plan described in subsection (14)(c)(iv) is
subject
only to the procedures and penalties provided for in
subsection
(13) and section 402 of the nonprofit health care
corporation
reform act, 1980 PA 350, MCL 550.1402, for a violation
of
a timely processing or payment procedure under subsections (7)
to
(11).
(13) In addition to any other penalty provided for by law, the
commissioner may impose a civil fine of not more than $1,000.00 for
each violation of subsections (7) to (11) not to exceed $10,000.00
in the aggregate for multiple violations.
(14) As used in subsections (7) to (13) and section 2006a:
(a) "Clean claim" means a claim that does all of the
following:
(i) Identifies the health professional or health facility that
provided service sufficiently to verify, if necessary, affiliation
status and includes any identifying numbers.
(ii) Sufficiently identifies the patient and health plan
subscriber.
(iii) Lists the date and place of service.
(iv) Is a claim for covered services for an eligible
individual.
(v) If necessary, substantiates the medical necessity and
appropriateness of the service provided.
(vi) If prior authorization is required for certain patient
services, contains information sufficient to establish that prior
authorization was obtained.
(vii) Identifies the service rendered using a generally
accepted system of procedure or service coding.
(viii) Includes additional documentation based upon services
rendered as reasonably required by the health plan.
(b) "Health facility" means a health facility or agency
licensed under article 17 of the public health code, 1978 PA 368,
MCL 333.20101 to 333.22260.
(c) "Health plan" means all of the following:
(i) An insurer providing benefits under an expense-incurred
hospital, medical, surgical, vision, or dental policy or
certificate, including any policy or certificate that provides
coverage for specific diseases or accidents only, or any hospital
indemnity, medicare supplement, long-term care, or 1-time limited
duration policy or certificate, but not to payments made to an
administrative services only or cost-plus arrangement.
(ii) A MEWA regulated under chapter 70 that provides hospital,
medical, surgical, vision, dental, and sick care benefits.
(iii) A health maintenance organization licensed or issued a
certificate of authority in this state.
(iv) A health care corporation for benefits provided under a
certificate issued under the nonprofit health care corporation
reform act, 1980 PA 350, MCL 550.1101 to 550.1704, but not to
payments made pursuant to an administrative services only or cost-
plus arrangement.
(d) "Health professional" means a health professional licensed
or registered under article 15 of the public health code, 1978 PA
368, MCL 333.16101 to 333.18838.
Sec. 2006a. (1) A health plan, after consulting with health
professionals and representatives of health facilities, shall
establish clear and unambiguous policies and procedures for the
submission of claims.
(2) A health plan shall not change or eliminate any coding,
policy or procedure for the submission of claims, or reimbursement
rate or methodology unless all of the following have been met:
(a) Written notice of the change or elimination, including the
effective date of the change or elimination, has been sent to all
affected health professionals and health facilities.
(b) The notice in subdivision (a) is sent not less than 45
days before the effective date of the change or elimination.
(c) The change or elimination takes effect on the date stated
in the notice under subdivision (a) unless another notice is sent
prior to the effective date that rescinds the change or elimination
or extends the effective date of the change or elimination.
(3) A health professional or health facility alleging a
violation of subsection (1) or (2) may file a complaint with the
commissioner on a form approved by the commissioner and has a right
to a determination of the matter by the commissioner or his or her
designee. This subsection does not prohibit a health professional
or health facility from seeking court action.
(4) In addition to any other penalty provided for by law, the
commissioner may do the following for each violation of subsection
(1) or (2):
(a) Order payment to be made, along with simple interest at a
rate of 12% per annum.
(b) Impose a civil fine or not more than $5,000.00 for each
violation.
Enacting section 1. This amendatory act takes effect October
1, 2005.